DOW futures are pointing to a higher open after the long holiday weekend, but it’s a different story in the NASDAQ. The big headlines this morning is that Apple Inc. (AAPL) CEO Steve Jobs is taking an indefinite leave of absence to focus on his health. AAPL stock is trading down more than 5% on the news, and given that it is a large component of the NASDAQ, has dragged the index down with it. Jobs’ departure has long been considered one of the only things that could slow the unstoppable Apple train.
Alcoa (AA) last week marked the traditional start of earnings season, but things don’t really heat up until this week. Citigroup is set to report this morning before the open along with several others, including Delta Air Lines (DAL) and Comerica (CMA). After the close AAPL gets its first chance to rebound after news of Jobs’ leave of absence as they are set to report earnings, along with Cree Inc. (CREE) and International Business Machines (IBM).
Scott Redler of T3Live.com says that while you shouldn’t be fighting this rally, discipline is necessary to avoid losses as the market remains extended. When bullish sentiment sits at climactic levels, a high volume break below support can trigger aggressive profit taking, and you should be quick on the sell trigger if you are an active trader. However, with everyone talking about buying the dip, it remains to be seen how deep a correction would be. Perhaps AAPL’s weakness could be the catalyst for a pull-back. For stock specific notes check out Redler’s Pricepoint Sheet at T3Live.com
Masco Ready to Break Out Again
Masco Corporation (MAS) manufactures, distributes and installs home improvement and building products, making it a strong economic recovery play. After putting in a nearly 6-month base, MAS made a high volume run of more than 20% in December before pulling off slightly. The stock has since turned back up, and looks set to breakout above its recent technical pivot area, says Evan Lazarus of T3Live.com.
Look to buy MAS through $14.10 for a move to the technical target area of $15 to $15.50. Initial stops on the trade should be at $13.50 in the case MAS breaks lower out of the current consolidation. After that initial projected 7-10% move, Lazarus says the stock could ultimately make it back to 52-week highs above $18.
Buy Accelerating Revenues Despite Overbought Market
The market had a very strong day Friday as a advance-decline line of 3-2 showed breadth to the breakout. Financials continue to assert leadership after a brief rest after JP Morgan Chase & Co. (JPM) came out with a strong earnings report. Citigroup Inc. (C) is the next up to bat this morning.
This market remains overbought, but bull markets can stay that way for a while. Let others stare in disbelief as your positions and trades work out. Let others talk about municipal debt crisis and a potential bailout of Portugal. Focus on the price action of the market and don’t invest with a bias. The market is still trading at a discount and you can look to buy strong companies with accelerating revenues, with is the focus of the Magnet stock selection process.
Buy alerts keep going off in Magnet, says Jordan Kimmel of T3Live.com. There are two components to Magnet: 1) pure Magnet score and 2) technical buy signals. Many top ranked Magnet stocks are now becoming technical buys. Tier into positions and scale back as they get over-bought, says Kimmel.
Acacia Research Corporation (ACTG) has not yet cleared the base but gave a technical buy signal after being one of the top ranked Magnet stocks.
Magic Software Enterprises Ltd. (MGIC) has had accelerating revenues and earnings, and now we are seeing accelerating volume confirm a bright future for this stock. Don’t get scared off by the fact this stock has tripled since October.
DDi Corp. (DDIC) and Impax Laborotories, Inc. (IPXL) are two others that are just beginning to clear a base. Nanometrics incorporated (NANO) is one that exploded Friday and you should not chase.
Get ready for another strong earnings season. Employment and housing remain drags, but the corporate recovery is in full swing. Look out for further announcements re: Merger Monday! Companies are flush with cash burning a hole in their pockets. Comerica already announced a stock-swap deal to acquire Sterling Bancshares Inc. (SBIB).
*DISCLOSURE: Scott has no positions mentioned. Evan has no positions mentioned. Jordan is long DDIC, MGIC, ACTG, IPXL, NANO.
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